Judge Glock on The Origins of the US Mortgage Market and Its Evolution to the Present Day

Judge Glock is an economic historian, a scholar at the Cicero Institute, and a returning guest to the podcast. Judge rejoins Macro Musings to talk about the origins of the US mortgage market as detailed in his new book, *The Dead Pledge: The Origins of the Mortgage Market and Federal Bailouts, 1913-1939*. David and Judge also discuss the emergence and evolution of the national US mortgage market, the price parity movement, the history of federal land banks, and more.

Read the full episode transcript:

Note: While transcripts are lightly edited, they are not rigorously proofed for accuracy. If you notice an error, please reach out to [email protected].

David Beckworth: Judge, welcome back to the show.

Judge Glock: Thanks so much for having me again, David. It's a real pleasure

Beckworth: Well, I'm looking forward to our discussion today about this book, but this is your second visit to the show. And we had an earlier discussion on a topic that's closely related to this book, same period. And that discussion was on a doctrine called the Riefler-Keynes Doctrine, which I found really fascinating for two reasons. One, it showed that the Federal Reserve actually was thinking in the '30s during the Great Depression about long-term interest rates kind of like they are today in the QE programs. But more importantly the second reason is because, what you show really undermines what is viewed as the conventional wisdom of what was the Fed thinking. I mean, most economic historians think the Fed could have done a better job, so what handcuffed them? And the standard story is the Real Bills doctrine. So maybe you could walk us through, kind of summarize that paper and then use it as a segue to move into your book.

The Influence of the Real Bills Doctrine

Glock: Yeah, absolutely. So like you said, the dominant view going back decades is the Federal Reserve failed in the Great Depression, basically failed to keep the economy going on a stable path and a stable amount of total nominal gross domestic product because they were obsessed with the Real Bills Doctrine. And the Real Bills Doctrine said, "Well, it doesn't really matter what the Federal Reserve does in terms of interest rates or this, that, and the other thing, as long as they're discounting, lending money on only short term merchants bills," usually less than 90 days deal or whatever it was. Which was the whole reason the Federal Reserve was created to kind of add liquidity and lend money on these short-term bills, "The economy is going to be fine." Because it's the sort of needs of trade argument.

Glock: As long as people are bringing the bills into the Federal Reserve, then clearly there is a demand for that and if they aren't bringing enough bills in then the Federal Reserve doesn't need to worry, then the needs of trade are down and it doesn't have to increase the money supply or do whatever else is necessary. And so the problem is that from my research, that didn't seem to be the real view of the Federal Reserve in the Great Depression.

Glock: And if you read the writings of people like Eugene Meyer and even some of the transcripts of the local Board of Governors meetings and so on, people like the New York governor of the Federal Reserve, George Harrison said pretty clearly, "No we're focused on long-term interest rates, we're focused on bonds. We're focused even on stocks, and we're focused on mortgages. And our whole job at the Federal Reserve is trying to get more money into all of these long-term markets, because these long-term markets are really what determines the shape of the economy." And frankly, that's what they tried to do.

Glock: The Federal Reserve from ‘29 to ‘33 devoted most of their efforts to try to reduce the interest rates on these other sorts of assets. And this book too tries to show that that interest in long-term assets, most importantly, mortgages was actually dominant, not just in the Federal Reserve, but kind of at the politics at the time, from the Woodrow Wilson administration through FDR. Basically, one of the foremost political issues was, how do we get interest rates down on mortgages? How does the government support mortgages both for farmers and for builders, and how can that help the entire economy grow and be stable? And I tried to show that that really reshaped a lot of what the federal government did in the first half of the 20th century.

Basically, one of the foremost political issues was, how do we get interest rates down on mortgages? How does the government support mortgages both for farmers and for builders, and how can that help the entire economy grow and be stable? And I tried to show that that really reshaped a lot of what the federal government did in the first half of the 20th century.

Beckworth: And that is super fascinating and speaks to the saying in Ecclesiastes, "There is nothing new under the sun." That this idea of lowering long-term interest rates, which has again been the focus of QE back in the previous, in 2008 crisis, as well as the one more recently. So I encourage folks to get out there and to read his article, we'll provide a link to it in the show notes, as well as his book. And again, for those economic historians out there, Judge's work should really give you pause about your belief and the Real Bills Doctrine being the dominant view during this time.

Beckworth: Okay. So let's move forward in into your book. And your book obviously is tied to what was going on in that first paper you just covered, but maybe we should motivate this discussion since it's about the mortgage market, by looking at the current state of the mortgage market. Why is this such an important topic today? Let's make this relevant. I just want to throw a few stats out there, and if you want to comment on them Judge, you can. But I find it useful to go to the Urban Institute's *Housing Finance At A Glance*, it's a monthly report, it's filled with wonderful charts.

Beckworth: Provides a nice summary of the US housing market, and particularly US housing finance, which is very unique compared to many other places in the world. So just a couple of summary stats to start this off. The value of the US single family housing market in the US is at $33 trillion. Very large number there. And 11.5 of that is in debt, the rest of it is an equity. And there's a lot of other things I could point to in this chart, but probably one of the most striking things is that most of mortgage originations are through either GSE, Fannie and Freddie, or the FHA, or the VA, almost all of it is being done through that.

Beckworth: So majority, I mean, a large amount is being done through these government sponsored enterprises. And the other kind of interesting fact I'll end with this, is that the 30 year fixed rate mortgage is still the key when it comes to mortgage products. I'm looking at a chart right now that it's about 80% of all mortgages that are initiated. I mean, this chart goes back from 2000 to the present. It's just the 30 year is the key, and I mean, there's just nothing like it out... I mean, there's 15 year, there's adjustable rate, but they're small in terms of comparison. And the 30 years is unique to the United States, is that right?

The Current State of the US Mortgage Market

Glock: The version of it that we have, which is a 30-year fixed nominal rate is, although there occasionally pops up in other countries, the dominance of it is unique to the United States and my book tries to get exactly about why that is. And then you kind of hit on it with the statistics you read about the percentage of the mortgage market that's supported by the Federal Government. As you mentioned, the FHA and especially the government sponsored enterprises, GSEs, Fannie and Freddie, and Ginnie Mae as well, they support the majority of this $10 trillion plus mortgage market out there.

Glock: And they are the ones that were able because of that government support to create what otherwise would be a fairly risky product for lenders, which is a nominally rated mortgage that's fixed for 30 plus years. And that's a very risky proposition for any lender to make, especially in a time of macroeconomic turmoil. But I try to show that the government created a lot of entities and you just rattled off some of them that were created in the first half of the 20th century. And there were many more, and that's kind of motivated me to do the research into this book.

Beckworth: Now, you've mentioned there's a barometer that looks at this type of off-balance sheet financing. So maybe speak to the audience about that.

Glock: Oh yeah. I don't think they've updated for a few years, but the Federal Reserve Bank of Richmond, for a few years after the financial crisis of 2008, kept what they called a bail-out barometer, which was trying to show what percentage of the US financial market is basically explicitly or implicitly guaranteed by the federal government. And the numbers they kept coming up with were around 60%. This is tens of trillions of dollars. And a large portion of that was of course mortgages that was Fannie Mae and Freddie Mac and FHA and the rest of it.

Glock: But another large portion of that was things like, of course, the Federal Deposit Insurance Corporation, the FDIC, which is guaranteeing a lot of those banks’ deposits and other things like the Federal Reserve’s sort of implicit guarantees of money market funds or other short term institutions in lending activities. And you've seen actually in the recent 2020 Coronavirus bail-outs, those sort of implicit guarantees sort of expand. We've seen a lot of the corporate bond market be supported by the Federal Reserve and local municipal debt even, and continued extra support for Fannie and Freddie. So the US government has long been intimately involved in supporting the financial sector. And most of that is dealing with mortgages most importantly, and most of that dates back to the 19-teens, '20s and '30s.

The US government has long been intimately involved in supporting the financial sector. And most of that is dealing with mortgages most importantly, and most of that dates back to the 19-teens, '20s and '30s.

Beckworth: One of the points you bring out in the book, which is still with us today is this tendency for the US government to do a whole lot of activity off the books or off its balance sheet. So even though we have a certain dollar size for the US budget, and we talk about debt and deficits, there is a far bigger number off balance sheet. And I guess one takeaway from this is we have a rich tradition in doing off balance sheet activity going back to these banks we're going to talk about in a bit. And I bring it up because last year I was making some comments on Twitter, some other places. I was being very critical.

Beckworth: Congress is effectively pushing its job onto the Fed's balance sheet. I mean, there was a pandemic, there was a response that was needed, but Congress should have been doing it in my view. There should have been an emergency response, but Congress should have been at the heart of it. Instead, the Fed was called upon to do it, for many reasons, but one of the implications is that the price tag is smaller because the Fed's doing it. And someone correctly pointed out to me, "Calm down, Beckworth, this is something we've been doing for a long, long time." And they pointed out the GSEs going all the way back to the early 1900s.

Beckworth: So, let's go ahead and jump into your book. You've kind of painted the picture. This is an important question and topic for us today. So it's good to know the origins of it. And you mentioned there's a lot of things that have happened in early 1900s, up to the Great Depression, that's what your book covers. But just again, just to highlight a point you make in the book before we jump into it, the government did a lot more through these agencies than it did through some of the official changes during the Great Depression.

Beckworth: And I'm going to just read a quote that highlights this from your book, and I believe this is on page four. We'll see what the final book looks like. I'm reading from the proofs that Judge sent me. But here's what you say, "Although the first half of the 20th century is often called the age of reform and innumerable historians have traced the new programs from minimum wage legislation, to food inspection, to Social Security that reshaped American economic and political life in this era, the government reforms to ensure balance through finance rivaled, or perhaps surpassed in scale, the more well-known programs. By the beginning of World War II, the government was surrounded by an array of semi-public financial institutions, unimaginable just 30 years earlier.

Beckworth: The government supported at that time, the Federal Reserve banks, Federal Land banks, Intermediate Credit banks, Reconstruction Finance Corporation, Federal Home Loan banks, Home Owner Loan Corporation, the Federal Farm Mortgage Corporation, the Federal Deposit Insurance Corporation, the Federal Housing Administration." And you go on, and again, you make the point that all of these agencies, these GSEs, when you look at the scale of them, they far surpass the visible government programs that people really talked about. So these were kind of in the background, right? They're not as well noticed, at least immediately.

The History and Scope of Government Sponsored Enterprises

Glock: Exactly. And so I think I mentioned in the book, if you look at that 1939 or 1940 Federal budget, it was about $9 billion, which was still a small relative to total gross domestic product, even relative to today. But if you look at these other programs, how many assets they had on their books, it was about $12 billion. And so these were significantly larger in their total amount of holdings and the entire Federal budget of the period, it's a little bit of a stock versus flow question all the rest of it. But to give you a scale, this is a double digit percent of GDP being supported by the federal government and these numerous entities.

Glock: And yes, we didn't think of them at the time because they weren't on the budget. They got submitted to Congress, they didn't have direct costs to most of the people at the time. Even their debt didn't seem to be on the government books. But as we now know, some of those programs, including things like the Federal Savings and Loan Insurance Corporation and Fannie Mae blew up decades later and ended up costing taxpayers hundreds of billions of dollars, so they can't have real consequences.

Glock: And yeah, in the first half of the 20th century the government, even though 1912, basically just did a typical taxing, and spending, and handing out money. As you mentioned that list, by the 1940, it had this amazing array of financial corporations where it was supporting a lot of financial assets. And as I kind of explained in the book, if you look at it, the biggest safety net, if you want to say, created from the first half of the 20th century is this safety net supporting all these different financiers and banks. And that seems to be by orders of magnitude larger than Social Security and some of the other programs that are more typically discussed.

As I kind of explained in the book, if you look at it, the biggest safety net, if you want to say, created from the first half of the 20th century is this safety net supporting all these different financiers and banks. And that seems to be by orders of magnitude larger than Social Security and some of the other programs that are more typically discussed.

Beckworth: Yeah. It definitely puts things in perspective. And you make another point in your book that when we talk about the financialization of the US economy, and that has received a lot of attention, and it's true. I mean, people love to go work on Wall Street, high returns to doing that. But the financialization of the US economy is not just a recent phenomenon, what we just described suggests it was something that was huge back in the early 1900s going up to the Great Depression period. So the financialization of the US economy was already in place by this point, is that fair?

Glock: Yeah. And if you look at just the numbers kept on the percent of GDP that were devoted to finance, they actually hit a temporary peak in the 1930s, about 6% of all GDP, a number they didn't hit again until the 1980s. And so there was definitely a focus on trying to revive finance. We often think of people like FDR, or Woodrow Wilson as been sort of railers against finance, but in short both parties, both the presidents from both sides were very much interested in supporting more finance.

Glock: Now, in and of itself, there's nothing wrong with that. There's a great economic literature going back to King and Levine and all the rest about more finance and more growth. But I think most people agree the sort of this finance that's guaranteed by the federal government can lead to a lot of problems when the federal government has to pick up the downside and the private sector gets to pick up the upside. And we certainly saw that in numerous crises from the Great Depression till today.

Beckworth: Okay. Well, let's jump into the historical outline of your book, and let's go to the origin story. Every story has a beginning. So where does your book story begin?

The Origins of *The Dead Pledge*

Glock: I probably got some flak from my publisher and others, by having it begin in the 17th century with the birth of bankers in England during the English Civil War. But if you look, I was trying to bring it so far back to show that there was this long evolution where commercial banks, banks as we often think of them, which is banks that take in deposit, usually lend money out for short terms. And they grew in sort of tandem and often in conflict with this other idea of the land banks. Land banks were banks that lended mainly on mortgages and that lent for the long-term.

Glock: And I describe how some mystical group, called the spiritual brotherhood in the 1650s came up with this idea and said, "Look, everyone knows we have this very valuable asset, land. That's sitting all around us, but we can't turn it into finance. And if financial banking becomes a significant part of the economy, farmers, and all the rest who depend on land feel left out. And so we need to create some sort of financial institution that allows us to unlock the value of this land."

Glock: And one of the things they were wrestling with for the next 150-200 years, "Well, how do we do that?" Because the problem is, and I pointed this out in Adam Smith's, *Wealth of Nations*, he has a discussion of the land bank idea. Because his patron the Duke of Buccleuch, I think it's called. Please Scottish pronouncers, you can rail against me on Twitter or elsewhere for that. But the Duke had run a land bank that was lending on mortgages in Scotland and it went bust, created a financial panic back in 1772.

Glock: And because of this failure, Adam Smith rewrote parts of the *Wealth of Nations* to say, "Well, look banking itself doesn't work with mortgages." Mortgages last for decades, potentially or five years, at least at the minimum. And a bank can only accept money on demand. You give the deposit, very short term, 60, 90 days, so forth. So there's no way to sort of square the circle and get mortgages into banks. And he said, "Commercial banks, all the rest of them should avoid mortgages. Other individuals should only be the people to loan a mortgage." As he goes into this sort of metaphor in the *Wealth of Nations*, how a bank should be like a pond where water is always flowing in and out constantly.

Glock: And that one became the basis actually for the Real Bills Doctrine, the Adam Smith theory that these banks should focus on short-term deposits, short-term lending, the rest of it. But this outrage, all these farmers, what are we going to do with all this land? We can't use this on collateral for banks where all the money is. And for most of the 19th century in America, mortgages were illegal for banks. And all of the banking, magazines, institutes, whatever said, you should never... the whole point of banking in fact, it's to try differentiate these real bills from these long-term mortgages.

Glock: And what I show in my book is, thanks to the farmers’ advocacy and these new corporations, the American banking system kind of turns into a mirror image of its previous self. While once banking with mortgages was illegal, if you look up to the 2008 crisis and beyond it, more than 50% of all bank assets became mortgages. So you have this transformation of, how do you get these short-term deposit taking banks into the mortgage market and the answer they come up with is, "Well, you just spread a lot of government guarantees all over those." And that helps convince a lot of these bankers they can invest in them with confidence.

What I show in my book is, thanks to the farmers’ advocacy and these new corporations, the American banking system kind of turns into a mirror image of its previous self. While once banking with mortgages was illegal, if you look up to the 2008 crisis and beyond it, more than 50% of all bank assets became mortgages. So you have this transformation of, how do you get these short-term deposit taking banks into the mortgage market and the answer they come up with is, "Well, you just spread a lot of government guarantees all over those." And that helps convince a lot of these bankers they can invest in them with confidence.

Beckworth: So, this is fascinating in the case of your book, your story begins in the US in the 1913 with the creation of the Fed. But to what extent did the agrarian revolt in the late 1800s also play into this? There's a rich story there, and I've actually done a little bit of work on this. And as I recall, one of the big things they complained about was a deflationary period that they viewed their terms of trade as not fair. Everything they were selling was getting lower and lower in price and what they faced was higher. I know there's been a huge literature on this, did they really have deteriorating terms of trade or not? And it's one of these things, it depends on what study you look at. And maybe there's a consensus, I don't know, you can share with me. But nonetheless this political fervor during this period, did that feed into this movement?

The Political and Economic Effects of the Agrarian Revolt

Glock: Oh, entirely. And so, yeah, as you mentioned, there's this long literature going back to the 1980s with Snowden and Eichengreen writing and yourself and others writing about how... Well did the farmers really suffer in the late 19th century, how bad was it because it was a deflationary period? I think people agree that deflation was difficult with farmers because farm good prices are more elastic, they tend to change more rapidly than other prices, they're less sticky. And one of the things my book tries to bring out is this kind of ideology they created beginning in that period, but going into prominence later of this balanced ideology. Well, the point of the government is these sectors are imbalanced, farming and industry, and later, well, certain kinds of industries, light and heavy industries. And the government's job is to kind of put its hand on the lever and balance them most importantly by supporting finance and whatever group they feel is left behind.

Glock: And yeah, the populist obviously made a big to do about this and for good reason. A lot of them were losing farms. They were losing farms to mortgages that were priced in previous times. Now, mortgages were often more short term they were today, five years. So it wasn't as difficult as the current 30 year mortgage with different nominal rates and you couldn't repay in five years and all the rest of it. But yeah, one of the things I point out is that everyone mentions the populist said like, "Oh they wanted to coin silver as well to increase the price level. And maybe they wanted this new kind of financing on crop warehouse receipts, and all the rest of it." But if you look at them and their 1890 platform, they said one of their major demands was for a land bank.

Glock: We need to create a bank the government actually owns to lend money on mortgages. And they were kind of laughed out of the respectable society with this. And even most of the political discussion moved on very quickly. But as I showed the government's still trying to find a way to answer that demand, of farmers for cheaper mortgage debt and mortgage debt that could be maybe more flexible in nominal long-term and could be refinanced, which was important demand to them all in case a deflation happened again. And so, the way they kind of squared the circle and they figured this out was yeah, we don't want a government land bank per se. We don't want something to happen, frankly like happened in the 18th century America which I'm sure if you look at the colonial currencies, almost all of them were based on land banks.

Glock: It was the state of New Jersey and Massachusetts and the rest of it said, "You mortgage your land to us, and we're going to give you a hundred pound note for it, 50% of the value of the land." And everyone knows that these became kind of… The colonial currencies became bywords for inflation down the ages. They were overprinted, they failed, the government tended to show favoritism and the rest of it. And so the government [inaudible] and the politicians said, "Well, how can we fix this, how can we not make it a government land bank? But something that still helps the farmers get financed."

Glock: And the sort of solution they hit upon, which later on people had to pay the price for, is this government sponsored enterprise. Why don't we create an organization that's privately owned but supposedly free of politics, but has that government support and subsidy kind of undergirded and hopefully that will allow the best of the private and public worlds. But as I mentioned before, maybe it allows both the kind of politicization of those institutions, and it also allows the government to pick the downside and private groups to pick the upside of those financial debts. And so that's kind of how the story plays out. Most importantly, with the Federal Land Banks, which I can go into if you care.

Beckworth: Yeah, just one more question about the historical context, because this is something that fascinates me. So you have this deflationary period, really from the end of the civil war up until like mid 1890s, right? And at that time, I believe that there’s some gold discovery, some things that kind of changed the regime into an inflationary regime. So you have this 30 year deflationary period, which it's a nice tailwind to this movement, I imagine, it's a great compelling story. Did the change in regimes to an inflationary one, did that inflationary regime take the wind or some of the wind out of their sails, did it kind of damper some of the support maybe for this direction that they were headed?

The Inflationary Regime Change and Federal Land Banks

Glock: Well, it definitely took a wind out of the sails of the sort of greenback or inflationary movement, which dominated a lot of the farmer discussions in the 19th century. If you look at the time when Woodrow Wilson was proposing and creating the Federal Reserve, he didn't propose it. And even the more radical sort of farmer groups didn't propose it as a way to inflate the currency. In fact, they tried to avoid that discussion as much as possible. So it took a lot of the wind out of the sales of that side of the movement. What it did do though, is at the same time the proportion of the economy devoted to finance was growing, at the same time, the financial sector itself was providing more support to industry. It made the farmers exclusion from that ever more important and salient.

Glock: So as these banks are doubling and growing in size, especially in the inflationary early 20th century, the farmers are more and more angry at their exclusion. As I mentioned up until the 1913 Federal Reserve Act, banks still couldn't lend on mortgages. One of the very minor reforms, which I mentioned in 1913, the farmers got into the Federal Reserve Act was allowing normal commercial banks to lend on mortgages for the first time. And the very fact the government was saying, "Hey, we're going to create this sort of institution, these Federal Reserve banks that are supporting the commercial sector and the manufacturing sector and the rest of it," made farmers’ ears perk up and say, "Wait, wait a second. We need our sort of support too, and how are you going to do that?" And that proved much more complicated. And that led to the creation just three years later of these Federal Land banks.

Beckworth: Well, tell us about that. That's an important part of the story.

Glock: Yeah, so the Federal Land banks were created in 1916 basically in the model of the Federal Reserve, there were 12 banks, they were jointly liable for each other's debts. The difference was instead of lending on short-term notes or whatever, and having the commercial member banks be the main undergirding the system, it would create these new banks, these kind of non-profit cooperative associations that would give loans to their local members. And then the Federal Land banks would package these mortgages to mortgage backed bonds. So this is one of the origins of the long-term government mortgage backed bonds and these Federal Land banks. And the government did not want to say this was a government agency or an institution and frankly, in that sense, it was similar to the Federal Reserve, which originally weren't government institutions.

Glock: And there are notes, in fact the Federal Reserve notes weren't even legal tender. It was just supposed to be you accept them kind of as you will. But the federal government in 1913 under Woodrow Wilson had guaranteed the debts of the Federal Reserve banks that said, "We're going to make sure all the notes are as good as gold. The federal government will step in, if for whatever reason, the Federal Reserve banks actually go bankrupt." And the farmers said, "Hey, we want the same deal." Even though, instead of dealing with these relatively unrisky short-term loans and merchant bills that kind of move in and out of banks relatively quickly, we're dealing with these very risky, back then it was even 40 year mortgages that the Federal Land banks were making and the government didn't quite do that.

Glock: They didn't quite guarantee all the loans, but they gave a wink. They gave a few little hints that these Federal Land nanks were more than private institutions being chartered by the government. They made things like, well they were tax exempt, the first tax exempt corporations in the US and the government could use their bonds for these special trust funds that the government bought for say, employees or others that were previously restricted to only government bonds.

Glock: Well, and we also can deposit a little money in the banks if they ever get in trouble. And so you hear a lot of rhetoric around the passage of the act in 1916, saying, "Look, the government's going to put itself in back of these banks." And you see a lot of congressmen saying very clearly, "I'm going to buy the bonds because I know the government is going to support them, and furthermore, I know my banks that I'm often a member of, occasionally director, occasionally even the president, are going to buy these government bonds, one because they're tax exempt and two, because the government is going to support them." And so leads to this land bank boom, and these really start exploding. And by the end of the 1920s, by most measures, they would become the largest banks in the United States.

Beckworth: Okay Judge, so that's the beginning of the Federal Land banks. You mentioned in chapter three how their role expands though, can you tell us a little bit about that?

Expanding the Role of Federal Land Banks

Glock: Yes, So the sort of deflationary issue that you mentioned earlier kind of comes to a head again in the 1920s. So after the federal government and the Federal Reserve was inflating the currency through the end of the 19 teens, a lot of the gold inflow from the rest of the world, scared by confiscations in Russia and World War I abroad led to an expansion in the currency in the US. But by 1920, the Federal Reserve really started to sort of try to get a handle on the economy, hiked up interest rates drastically, pulled back the money supply. And you got a very drastic deflation very suddenly. And the farmers were of course outraged about this because again, farm crops tended to be the first to sort of change in price. They were more elastic, less sticky than other prices. And so their terms of trade with the rest of the economy got worse.

Glock: But they were also outraged because the federal government had just been encouraging a lot of banks to make these long-term high nominal rate mortgages, and a lot of other debts. And a lot of local non-government backed banks were making a lot of similar loans to farmers that were now going into delinquency or default. And so the Federal Land banks now had this opportunity as many sought to support the rural banking system, even though the original motivation of them was supposedly about how can we protect farmers, and how can we help them get access to finance? If you look at all of the members of the Federal Reserve bank, they tend to be bankers and often tend to be continuing bankers. Some of them will testify to Congress that, "Well I get a few loans from my own Federal Land bank, and my bank is in the same location as the loan office, the Federal Land bank and I send guys to one or the other, depending on how we can best serve them."

Glock: But these bankers say, "Look, the Federal Land banks offer a great opportunity to take bad loans off my books." You lend a thousand dollars to a farmer on a mortgage and that farmer can pay back his loan to the local bank. And a lot of the Federal Reserve banks, Federal Land banks, and a lot of Congressmen say this very explicitly, this is the goal. We're trying to get these bad, or what they call them frozen assets, kind of the equivalent of the 21st century toxic assets, off these banks’ books by giving these new mortgages. And some of these mortgages obviously, were given to farmers in very dire straits, but there was also a lot of politicization involved in this.

A lot of the Federal Reserve banks, Federal Land banks, and a lot of Congressmen say this very explicitly, this is the goal. We're trying to get these bad, or what they call them frozen assets, kind of the equivalent of the 21st century toxic assets, off these banks’ books by giving these new mortgages. And some of these mortgages obviously, were given to farmers in very dire straits, but there was also a lot of politicization involved in this.

Glock: I mentioned the Federal Land banks had to acquire a whole report in the 1930s of every loan that was given out to a congressman, senator. I think everyone up to their first cousins. So they really had to go to the geological tables to get details, but they kept track of it for the good reason. They know they wanted friends at their side in Washington, and you'd see people like a representative Bankhead, or Senator Bankhead from Alabama. They had multiple loans that were in default and weren't paying off and against the rules that the Federal Land banks, the banks kept giving them. And you can see it too in the hiring side of this.

Glock: You had a bunch of letters from congressmen. I think there was a great letter from the Federal Land Bank board in DC that said, "Well, can you hire one of the Senator Fletcher's brothers?" And they said, "Oh, we're just being the local land banks and we're just inundated with his kin. We can't hire everybody this guy happens to be related to." And then the board says something like, "Well, if we can make any friends in Washington, we should very, very, very..." I think maybe four verys, much try to accommodate them.

Glock: And so, this led to a number of problems, one that political pressure to make these politicized loans, two the political pressure to hire people that were maybe likely to be a little more friendly in their appraisers, the appraisers that were evaluating the local farms. And this kind of led to a short-term blow up. By ’26, ’27, a lot of these banks were in trouble. The Calvin Coolidge Administration had to fire a bunch of members of the board. They brought in this new guy, Eugene Meyers, who was previously a major stockbroker and a Washington power player, and then he becomes a major force trying to revive the Federal Land banks and eventually becomes, also not unimportantly, the chair of the Federal Reserve Board in Washington.

By ’26, ’27, a lot of these banks were in trouble. The Calvin Coolidge Administration had to fire a bunch of members of the board. They brought in this new guy, Eugene Meyers, who was previously a major stockbroker and a Washington power player, and then he becomes a major force trying to revive the Federal Land banks and eventually becomes, also not unimportantly, the chair of the Federal Reserve Board in Washington.

Beckworth: Okay. So the next thing that happens as we follow through your book, is this movement you call, the price parity movement in the 1920s. So kind of along the same timeline here in that decade, but maybe for the sake of our listeners, and you've mentioned it already, but maybe summarize again the basic idea of the economic balance view or framework that was so popular, then how it kind of grew into a price parody framework.

The Economic Balance Framework and the Price Parity Movement

Glock: Exactly. So the balanced economy ideology I try to show, it was extremely prominent the first half of the 20th century, and really hasn't received much attention from historians or economists or others. But the basic idea behind it is that we conceive or they conceived the economy as these sort of large sectors that traded with each other. It was farming and industry, or it was light industry and heavy industry. And we need to take these sectors in some sort of balance, either as proportion of population or as proportion of their total income, relative these other sectors, if you're going to expect the trade to continue and the economy to keep growing, that's the basic idea behind balance. And now the financial side of that is a lot of what motivated these Federal Land banks. People said, "Hey look, the proportion of the population's farming has been decreasing for decades." Basically since the creation of the United States, but still, we used to be 50% of all the workforce in 1880 and by 1920 we're about 30%. And we have to stop that, we can't have an economy with no farming.

Glock: For a lot of people that was absurd, just like in the 1980s or 1990s, you would have heard a lot of people say, "Oh, we can't have an economy without manufacturing." That's what the economy does. Everything else is just sort of middlemen on top of that. And so you had these people say, "How can the government do that, if you have this imbalanced economy, how can the government sort of bolster up those sectors they're behind?" And originally that was all involved finance. They think, why is the farm economy in such dire straits, or why are people leaving the farms for the cities? You see a lot of rhetoric at the time, well they're leaving because of these terrible high price mortgages, and they can't get finance and they can't buy the land, they can't finance their crop planting or buy a new barn and the rest of it.

Glock: And so, the Federal Land banks were the attempt to sort of support that financial side of it. You had this financial inequity. And the finance was from the government land banks where elsewhere was going to bolster up that farm side of the economy. Now what you saw in the 1920s though, as I mentioned that sort of deflation that was happening especially for crop prices is you had this new ideology, what we need is balance of prices. You mentioned the terms of trade in the 19th century with farmers and the rest of the economy, and the populist movement at the time had a lot to say about that. But in the 1920s, it became major political movement in both parties. Well, the government can set the price. If we're worried about the terms of trade, let's not just inflate the whole currency or do X, Y, or the other thing, let's just make sure the farm price is higher than it's been recently.

The Federal Land banks were the attempt to sort of support that financial side of it. You had this financial inequity. And the finance was from the government land banks where elsewhere was going to bolster up that farm side of the economy. Now what you saw in the 1920s though, as I mentioned that sort of deflation that was happening especially for crop prices is you had this new ideology, what we need is balance of prices. You mentioned the terms of trade in the 19th century with farmers and the rest of the economy, and the populist movement at the time had a lot to say about that. But in the 1920s, it became major political movement in both parties.

Glock: And that's the price parity movement. And this leads to the idea that farm prices should have the same level as they get relative to industrial prices they did in 1930, right before World War II. Oh, sorry, World War I. And this has become the very basis of American foreign policy for the next century. If you look even til today, you'll have these things, they'll talk about the parity price and they'll set the price of corn or whatever, and the government will buy up the extra corn to make sure that the price parity is still the same relative to this absurd 1913 price or so on. But what I show is that when this first started, the government policy of these price parities started in the Herbert Hoover administration with this Federal Farm Board which was supposed to buy up excess crops and hold them until the price is revived.

Glock: And one of the big motivations there too was financial again. So the financial side of it said, "Look, all of these rural banks again are suffering because the crop prices are low, the farmers can't pay off their loans. And so if we bolster the farm price we can help these rural banks get out of trouble." And as I mentioned in the book, the rural banking crisis in the 1920s was not one to skip, the 1920s, it saw more bank failures than any previous decade in American history. We don't think of a lot of them, they were very small rural banks, but it was in the thousands. And this was even before the 1929 crash. And so they said, "Well, this price parity is going to help bolster them up." And as this Federal Farm Board was working in the Herbert Hoover Administration they had a lot of explicit days where they said, "Listen, we're going to buy up every cotton, basically cotton bale in the United States in November, 1930, because we’re seeing a crisis in the southern banking system based on cotton. And without it, if we didn't do this, the banks are going to fold."

Glock: So this is another area, sort of like the finance side of it, where you saw a lot of power from the financial sector, sort of take these ideas that were originally meant to support farmers and use them as another way to bolster finance. But what we saw like the Federal Land banks is when you're supporting a lot of prices that may be supply and demand are showing should go down, the government might take losses. And so the Federal Farm Board loses hundreds of millions of dollars goes bust in a few years.

Glock: The depression obviously makes sure and the overall deflation there make sure farm prices don't go up. And the government tries again to try to push the Federal Land banks back into this and say, "Well, okay, let's double down on this. If we could put even more mortgages out here, we can save these rural banks that are threatening the entire economy that are going to collapse. We can help the farmers get back on track and thus revive the whole economy and balance it again." So that's the sort of path they were going on as the Depression was hitting and all of these prices were collapsing.

Beckworth: Yeah. I was familiar with the attempts by FDR to keep output prices high, I think it's been pretty well documented, all the different agencies and attempts, farm prices, production prices, artificially capping supply. The stories of farmers slaughtering lots of pigs out in the country while people were starving in the cities, kind of a classic 1930 story. But what you show in your book is this thinking actually comes out of the 1920s. It actually is an idea to kind of just follow through into the Great Depression. So let's talk about the Great Depression, because you go on and I believe this is the period where this idea of supporting the farmers eventually migrated to supporting the city, supporting the urban environment. So talk us through that.

The Great Depression Transition Period

Glock: Yeah. So as I mentioned, when they expanded the sort of balance sheet of the Federal Land banks in the Great Depression and used them to sort of help bolster the rural banking system, the Federal Land banks started to be insolvent. And they then in January, 1932, Hoover, President Herbert Hoover got Congress to pass a special bail-out act. That gave hundreds of millions of dollars to these Federal Land Banks and he said this was only for the short-term liquidity issue and we only need to support them for a moment during the height of the Great Depression. What I show a little bit in this book and another paper I published in the Business History Review is that by all the contemporary accounts inside the banks, they were insolvent, they were incredibly insolvent and without the government money, they would have gone bust.

Glock: And so in this sense, you have the first actual bail-out of a American banking institution by the federal government, this is the sort of origin of American bail-outs. And when you talk about a government sponsored enterprise that at least puts that mortgage backed bonds, and it gets bailed out in a financial crisis, this might ring some bells obviously of 2008. And that was one of the main things I wanted to study when I got into this, because this becomes the origin of that sort of policy clearly. But as you mentioned, this migrated pretty soon into the urban sphere and one of the most shocking things is in January, the Federal Land banks get bailed out. They're insolvent by any measure, they seem to have been a bust.

Beckworth: What year was that?

Glock: This was 1932.

Beckworth: ‘32, okay.

Glock: Yes. And so just six months later though, you see the Federal Home Loan banks created, which are almost the exact mirror image of the Federal Land banks. They're 12 banks. They’re supported by these semi cooperative members, then known as building in loans later savings and loans. Of course, maybe many of your listeners will be familiar with the Bailey Brothers Building and Loan from It's A Wonderful Life, which still forms much of her image of this period. But that movie, that scene, if many of you remember the bankruptcy on that, it's the same problem that these mortgage sort of advocates have been talking about forever, that was also applying to urban mortgages. When you have Jimmy Stewart saying, "Your money is not here. You got this place all wrong, it's in Jim's house and John's house." And so on, he was talking about the same problem of illiquid mortgages that the farmers have been talking about forever.

Glock: When you have these short-term depositers, who can ask for their money back at any second and for what it's worth in the scene, Jimmy Stewart actually says, "Well, I can give you your deposit back in 90 days." Because a lot of these banks had clauses that allowed them to hold off. And everyone was shocked because they never actually enforced these clauses, but this was supposed to be the sort of thing to allow them to get that liquidity back. But this was the same problem, if your money's in this long-term house and you have this short term bank that's taking in deposits, how do you work that? And so when you saw a lot of building and loans go bust in the Great Depression, people said, "Hey, we have a model for this. We have the Federal Land banks. So let's create the federal home loan banks," which do almost the exact same thing.

Glock: Well, they buy up and issue bonds based on these local building and loan mortgages and they can give liquidity. If you're a bank in trouble, you’re Bailey Brothers and someone comes to you for your deposit, you can ship your mortgage off to the Federal Home Loan Bank and they can give you cash that afternoon and you can pay out your depositor and you can be safe. I mean, the surprising thing though, is that they weren't created, again just about six months later in 1932 after the similar institution was just bailed out and was incredibly insolvent. It was only because Herbert Hoover had hidden the real state of the Federal Land banks from the people in Congress that they didn't know that they were modeling this after a rather poor model perhaps, it was politicized and all the rest of it.

Glock: But they created that. And part of that was because this theory about balance had then, as you mentioned, migrated to the urban sector into the industrial sector and they say, "Hey, look," and this is true. If you look at the stats of the Great Depression in terms of what industries were collapsing it was the heavy industries, construction most of all. The whole economy was about 30% down from its peak, construction was 90% down. The heavy industries that were based on investment were 50, 60% down. They said, "Hey, look, there's this imbalance in the economy between this stagnant sector and this buoyant sector," which is the light textiles and consumer goods and all the rest of it. And this is, I mentioned when we discussed before in the Riefler-Keynes piece, that was sort of the motivation behind that.

Glock: That they say, "Hey, look, these sectors are depending on long-term debts are down. How can we bolster them, in construction most of all." And they all say, "Well, construction supports everything, it supports the lumber industry, the furniture industry, all these things that are particularly depressed in the Great Depression." They say, "Hey, again, we can create finance to do that." And if you look at just about everything Herbert Hoover did in his presidency, it was trying to give more support to the housing construction. From the Reconstruction Finance Corporation, they were supposed to buy it bad debts and mortgage debts to these Federal Home Loan banks, to encouraging the Federal Reserve to buy up long-term assets and to make mortgages.

Glock: That obviously failed because again, the country wasn't in great shape when he handed it over to FDR in 1933. But as they showed too, FDR basically took everything on this from the price parity movement, which we mentioned expanded into the Great Depression and made a much bigger part of it. He took the Federal Land banks and created the Farm Credit Administration that, which was this new massive, as some people called it at the time, super bank. And then he expanded a lot of the urban mortgage supports as well.

If you look at just about everything Herbert Hoover did in his presidency, it was trying to give more support to the housing construction. From the Reconstruction Finance Corporation, they were supposed to buy it bad debts and mortgage debts to these Federal Home Loan banks, to encouraging the Federal Reserve to buy up long-term assets and to make mortgages. That obviously failed.

Beckworth: Yeah. The story you're telling definitely illustrates the danger of using this balanced view, because you can always find a sector that's not imbalanced. And you might start big and then you could, well, within that sector, you could find another sector, right? So you mentioned in the urban area, and it was the heavy manufacturing. But then the textiles, consumption goods, they were fine. Well, I could just see easily you drilling down to a more narrow or narrower slice until you hit your constituent group. So, let's go on to FDR’s… and you mentioned some of what he did and probably the best known, I think, story that comes out of this is, is Fannie and Freddie, the GSE. So what's the transition from the FHB to the GSE. So the Federal Home banks, I mean, you mentioned there's some change that takes place. So walk us through that. How do we get to Fannie and Freddie?

The Evolution from FHB to GSE

Glock: Yeah. So yeah, the story sort of culminates in the creation of Fannie Mae in 1938, which becomes again, most infamous for the collapse and the bail-out about 70 years later. So FDR took all these theories about the balanced economy and about the sectors that had fallen behind and he expanded the farm sector part of this. And if you look at his campaign originally, it's all about balancing the farm economy with the industrial economy and Roosevelt has this famous, Forgotten Man speech. But if you look at it, he was very clear, the forgotten man is the farmer. It's not some abstract forgotten man or kind of person, the farmer's forgotten, and we need to bring the farmer back up. And if look at it, he has a house divided speech. We can't do a half boom and half bust, kind of reechoing Lincoln's famous speech, half slave and have free.

Glock: But again, it's clear that he's talking about the boom and the bust is the industrial economy and the farms. So he expands all these farm economy supports and the price parity and the rest of it. But again, the economy is still fairly depressed. And as you mentioned, the famous things he set up such as the Agricultural Adjustment Administration and the National Recovery Act, and Recovery Administration did a lot of things to raise prices. But most economists agree now that probably squelched extra economic growth, because it was, when you had a problem that was created by deflation and you had sticky prices that didn't go down, the last thing you wanted to do was jump them all back up like this kind of balanced theory would seem to argue you should do at the time. But that's what they did.

Glock: And so when the economy wasn't fully reviving, FDR sort of said, "Well, we have the same problem Hoover did. We got to move over to the urban sector too, and how can we do that?" And they reshaped a lot of the institutions for that. The first thing they created is the Federal Housing Administration which is another step above the Federal Home Loan banks. And now people sometimes start squinting more when I tell them this part, if they haven't already been squinting or running out the room from the rest of it. But this is like, how many different federal housing programs are we layering on top of each other and how different are they?

Glock: So, the Federal Home Loan banks can give you liquidity for a hot second. If you need a mortgage, you've got a mortgage on your books, you’re Bailey Brothers and you just need a few bucks in the pocket. The Federal Housing Administration does more, it insures the mortgage against default. So this is not just a liquidity issue, this is a solvency issue. Any individual, Tom, Dick and Harry who makes a mortgage can now go to the Federal Housing Administration or the bank can, and they can get a government guaranteed insured mortgage. That if that defaults the government's going to pay off your mortgage at basically full value, and so they do that. And the other thing they do is change the Federal Reserve itself. So the Federal Reserve in 1935, there's the famous Federal Reserve amendments, at least famous to some, that make the Federal Reserve more centralized in Washington. And they make the Federal Reserve Board of Governors, really the directors of it, as opposed to these nominally private 12 member banks and all.

Glock: But people forget that one of the most important parts of that, and one of the parts of that act that were most advocated by Marriner Eccles, who becomes the chair of it was this new thing to expand normal bank investments in mortgages, and to allow the Federal Reserve itself to discount mortgages, to buy up mortgages. So now we're approaching something where the Federal Reserve itself is approaching this land bank idea. Marriner Eccles, who himself helped come up with the idea of the Federal Housing Administration and was one of the major pushers from it in the treasury and the year before, and as they show there's some good reason for this. He had he was still invested in numerous construction companies, and he also had some of his own banks and investment companies, the Eccles family investment companies that were in very bad shape as some of the bank examiners report said.

But people forget that one of the most important parts of that, and one of the parts of that act that were most advocated by Marriner Eccles, who becomes the chair of it was this new thing to expand normal bank investments in mortgages, and to allow the Federal Reserve itself to discount mortgages, to buy up mortgages. So now we're approaching something where the Federal Reserve itself is approaching this land bank idea.

Glock: And if he hadn't gotten some of these things passed, they may have been in real trouble. But so Marriner Eccles really pushed all of this. And he was saying, "We have to get rid of the Real Bills Doctrine entirely." So if you look at 1935, this is just 22 years or so after the creation of the Federal Reserve, but the system was supposed to be created for all these short term real bills. And now you have a new head, a new law that says, "Hey, you can discount mortgages, you can buy up these debts. Commercial banks can invest in as many mortgages as they want. The Federal Reserve can support them." And you've reshaped this whole Federal Reserve system into this kind of already near image of it previous itself, where you try to support the mortgage debt.

Glock: And then, a few years later in the midst of the Roosevelt recession in 1937 you have the expansion again. Well, the banks don't have a lot of liquidity, there's not enough money going into deposits, we create this Fannie Mae that can buy them up and send off these mortgage backed bonds to create more investors and mortgages. And so now you've got layer on layer, the Federal Home Loan banks and the Federal Housing Administration and the Federal Reserve and the Fannie Mae, all of these things are supposed to be kind of undergirding this mortgage market. And as well as some other things such as the Federal Savings and Loan and Insurance Corporation, which is giving deposit insurance to these buildings and loans like the Bailey Brothers. And it's so they can act more like banks and can make more of these long-term mortgages that people won't pull them out in a run anymore.

Glock: So all of this is building up in all of this, and so we just have a lot, a lot of liabilities. I mentioned the majority of these new programs that governments created in this period are dealing with mortgages. And this is $6 trillion plus, or sorry, $6 billion plus, different era, that is supporting these. And a lot of these go bust sometimes decades later. So they didn't cost anything then and FDR, and Hoover and the rest didn't have to ask for any special money, but they all made very clear that, "Well, we know at some point or another, maybe the federal government's going to have to pay for some of these debts where we're guaranteeing."

Beckworth: Well, that's quite a history there, you've packed into the 1930s. A lot happened. I mean, fairly, all these new agencies and probably the legacies from that period with us today, right? All these government sponsored enterprises. So some questions that kind of flow out of that, so here's a question that I've heard discussed before and reading your book it's not quite clear with what I thought before was correct, but when would you say a national market for mortgages emerges?

Beckworth: So part of that, you mentioned It’s A Wonderful Life. Part of the story he says is, "Hey, Bob, your money's in George's house over there, and Sue your money's in John's." It creates this impression that the market for mortgages is still local. But all of these agencies, these GSEs that are emerging, they're effectively creating a national market for mortgages. So when would you say that there was such a thing as a national market? So someone in New York could invest in a mortgage backed security that had mortgages in other parts of the country

The Emergence of a National Market for Mortgages

Glock: Definitely during the 1930s and it becomes prominent definitely by the 1950s. So, as you mentioned, mortgages are an odd thing to make a national market about. Not only are they very individualized and very long-term, but they're based on very particular debts. It's not like we got a note on 20 bushels of grain and 20 bushels of grain are the same in Chicago as they are in Los Angeles. Mortgages are based on this little hunk of land that's totally distinct in Indianapolis, than it is New Orleans and all the rest of it. And so the distinctiveness and the strange aspects of mortgages, or one of the reasons the government feels it needs to step in, and by the 1930s, you see a lot of people saying, "Well, we need to create a mortgage market." This is a conscious decision.

Glock: I mean, a lot of this also has to do with what some of your listeners may know is sort of the original sin of American banking, which is the unit banking system. You have all of these very, very small banks that can, even the buildings and loans, only loan locally, or they're not allowed to expand to other cities, let alone other states. And all these systems much like the FDIC is meant to support these tiny banks that may have suffered bank runs and can't move money around in different areas. All these systems are trying to encourage all these little banks and B&Ls, and S&Ls to make all of these mortgage loans, because they can say, "Hey, look, I can make a mortgage loan which may be for a small S&L that can only have 10 or 12 on their balance sheet." I mean, these are significant investments for relatively tiny banks.

Glock: But I can make them because I can sell them off to the Federal Home Loan banks or Fannie Mae. And then somebody in New York, or Chicago, or San Francisco, can buy that mortgage back bond or can buy the Federal Housing Administration insured mortgage, because they know it doesn't matter where the mortgage was made. It doesn't matter if it was made in Indianapolis because the government is telling you it's as good as gold, it's insured. We're guaranteeing the value of it. So all of these things are specifically designed. So hey, all of these local banks can make the mortgages, they can encourage them, they can trade them back and forth without having to worry too much about kind of what's under the hood.

Glock: Sort of like the Gary Gordon's discussion of the 2008 panic and what happens when cash like instruments are no longer cash like, you actually have to have information about them. In this case, as long as the government is supporting them all, you don't need any information about them. You can just trade them back and forth. And that kind of leads to the explosion in mortgage debt that you especially see after World War II and bleeds to this kind of national mortgage market of trading them back and forth.

It doesn't matter if it was made in Indianapolis because the government is telling you it's as good as gold, it's insured. We're guaranteeing the value of it. So all of these things are specifically designed. So hey, all of these local banks can make the mortgages, they can encourage them, they can trade them back and forth without having to worry too much about kind of what's under the hood...In this case, as long as the government is supporting them all, you don't need any information about them. You can just trade them back and forth. And that kind of leads to the explosion in mortgage debt that you especially see after World War II and bleeds to this kind of national mortgage market of trading them back and forth.

Beckworth: Yeah. So that raises another question. And that is, can a national mortgage market exists on its own? Because the mortgages, as you mentioned, are so idiosyncratic, they're so unique to each location. I mean, on one hand that would say no, other hand you might say, well, diversification, synthetic products, you could come up with something. But going back to this Urban Institute report that I cited some stats from one of the striking charts in there that I didn't mention is, you do see, maybe one of the few attempts to really grow private label, mortgage backed securities. And it gained some ground up through the mid two thousands, then boom, it's gone. And there's very, very little. It's a sliver of the market right now. It's mostly all GSE across, up and down.

Beckworth: So I'm wondering if in a different world, if there had been no government intervention, would we even have a national mortgage market? Or do you think our financial engineers are so smart, they still come up with some way to do it?

Glock: There's probably some way to do it. So as you mentioned there's two attempts that really happened. I only stated briefly in the book, but in the 1880s and early 1890s, there was a short-lived mortgage bond market, where they tried to diversify and some of these small groups tried to do it. And it went bust in the 1893 panic and wasn't really revived. And then as you said again, in the early 2000s, you had this very sudden explosion where private label mortgage-backed securities were the majority of the market, and then went back down to almost nothing. The answer without the government is probably not at least any sort of mortgage that Americans got used to.

Glock: So one of the problems with the private label mortgage market is the idiosyncrasy of it. You can diversify and you can make enough of it to make some different aspects and bets on different parts of the country. But when we have a 30 year fixed rate pre-payable mortgage, that's very difficult. Because now you have also where the financiers take all of that interest rate risk, that if it drops, you have to get early repayment of your mortgage. And that's something that, again, the federal government created, even in the 1916, the Federal Land banks, that pre-payable aspect of it. Because exactly farmers didn't want to get stuck with these higher interest rate mortgages like they did in the 1890s and not be able to pay them down.

Glock: So that was created with all of our subsequent things. You and I, or anyone else who has a mortgage, I guess I should mention that I still have yet to have a mortgage of my own, maybe one day after I write a few more books on it, will say that the interest rates have gone down consistently for 20 plus years, 30 plus years in the United States, and we can keep refinancing and repaying. And that's pretty tough to have a private sector will take that off or take the risk of another crisis. So other countries have some versions of this, the Danish covered bonds are often mentioned, and there's a where the banks support them to some extent, and you have diversified mortgages.

Glock: You can have something like that probably, but something based on the 30-year fixed interest rate, pre-payable mortgage, like we have in the US, there's a reason that's dominated by the federal government. And even those private label securities in the early 2000s. If you look at them, what was one of the reasons people were so invested in them, because they did also know, even though technically private, there were all of these other things that they could probably go to. They were relying on the VA, or FHA, or Fannie Mae or Freddie to buy them up if they were in a pinch or the rest of it. So yeah, without the federal government support, we definitely wouldn't have a mortgage market anything like we would now our banking system like we do now.

Without the federal government support, we definitely wouldn't have a mortgage market anything like we would now our banking system like we do now.

Beckworth: Okay, we are getting near the end of our time, but I want to end on a question, kind of a big picture question. So if I step back and think about everything we've discussed, think about your book and maybe see it as part of the bigger trend. And I want to illustrate this idea, this trend, by referencing another development, another argument maybe that has been made over this period. And this is the argument for why the gold standard worked relatively well during the classical gold standard from like 1870s to 1914, and then it did so awful during the Interwar Period. So leading up to the Great Depression. So when you compare those two standards, very different outcomes, and lots of stories are given.

Beckworth: But I think one of the more compelling or convincing stories is given by Barry Eichengreen. And he said, "Look, the reason the classical gold standard worked relatively well was because people simply didn't have the voice they had by the Interwar Period, and for the gold standard to work well, it requires pain." If gold leaves the country, it requires a recession. In other words, a country has to be willing to sacrifice domestic stability to preserve the gold standard. International balance is maintained at the expense of domestic balance.

Beckworth: But by the time you get to the Interwar Period, that's not going to happen. Politicians are not going to allow that to happen. I think he uses the term enfranchisement people's voices are heard, politicians respond and I know some of the push back, well, it was the central banks who caused the problems in the 1930s, but why were the central banks so sensitive? Because of the politicization of the environment. And so I find that a very convincing argument, as democracy grows, politicians respond in kind. And I'm wondering, could you take that same idea and place it on top of the story you're telling in the book?

Applying the Link Between Populism and Politics

Glock: I think so. There is a similarity in this way. So whatever you think of the sort of general outlines of the balancing ideology bouncing through finance or the rest of it, it did at least sort of have parameters or bumper lanes, where we're supposed to operate. So say if the farm sector was doing better and you were supposed to then tamp it back down, or if the construction sector and housing was doing too good, relative to the economy, you'd you tamp that back down. But what you found is a lot of people who had supported this ideology, very fervently like Marriner Eccles, like Winfield Riefler in the 1930s were terrified when the 1940s and '50s happened that the mortgage market was booming. And they said, this is creating more inflation, we need to pare it back. We need to control these different levers, again, push them down.

Glock: But what they found is there was just no political appetite for that. This industry was huge now and had supporters in Congress, there was a housing block in Congress they said, and we can't now just turn the levers in a different direction now that we're happy where the previously depressed part of the economy was. And that's basically what you saw. There was this attempt in the 1950s for Winfield Riefler when he was back at the Federal Reserve to create what he called a bills only doctrine, which was the Federal Reserve, only buying up short-term bills. And that was kind of him trying to push back on what he saw as his work in the '30s. Which was, "No, no, no look long-term is doing great now, construction is great. We need to tamp that down again."

Glock: But what you saw is JFK actually ran against this. He mentioned this sort of stuff in his campaign and he said, "We're going to loosen up long-term loans again, we're going to get more money back into mortgages." And he won and he pushed that. And from them up until 2008, you saw a new appetite to do anything but keep throwing more and more money at the mortgage system. And when you saw a lot of the bailouts in the consequent, again, the Federal Savings and Loan Insurance Corporation. What I didn't mention before is the Federal Land banks that were bailed out in 1932 they got bailed out again in the 1980s with a few billion dollars in funds.

Glock: It was relatively minor next to the big S&L crisis, so people forget it. But people also forget that was the second time this industry would be bailed out. And I have no doubt somewhere down the road, we'll probably a third, or maybe fourth bailout of some of these. So yeah, that's the political aspects of this for something, the ideologues, who, some of them were self-interested, some weren't, but they seemed to take this seriously and they didn't realize that they weren't going to be able to kind of control the politics of this after it got away from them.

Beckworth: And that is interesting. Marriner Eccles wanting to put the genie back into the bottle after he pulled the lid and shoved it out. So he saw firsthand the price of democracy, once you taste that sweet housing market experience, it's hard to go back. Well with that, our time is up. Our guest today has been Judge Glock, his book, and you can check it out is titled, *The Dead Pledge: The Origins of the Mortgage Market and Federal Bailouts, 1913-1939*. Judge, thank you for coming back on the show.

Glock: Thank you so much again, David.

Photo by Win McNamee via Getty Images

David Beckworth
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May 10, 2021
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Early 1900s agrarian society helped shape the American mortgage market, leading to a government policy response that has had a lasting impact to this day.

Judge Glock on the Riefler-Keynes Doctrine and Monetary Policy During the Great Depression

David Beckworth: Our guest today is Judge Glock. Judge is an economic historian and a scholar at the Cicero Institute in San Francisco. Judge's research is focused on the Great Depression and has recently published a paper on an important idea shaping Fed policy during this time. The idea was the Riefler-Keynes Doctrine.

Judge joins us today to discuss this paper and the Great Depression. Judge, welcome to the show.

While transcripts are lightly edited, they are not rigorously proofed for accuracy. If you notice an error, please reach out to [email protected].

Judge Glock: A real pleasure to be here. Long-time listener, David, so happy to be a participant too.

Beckworth: Well, thank you, and I can say this honestly that this paper was really one of the few papers I've read in a long time that really opened my eyes, really some new thinking, some ideas. It really, to me, stressed the importance of the history of economic thought, why it's important to go back and look at what people have discussed before. As we get into your paper, we'll see that some of the recent debates really aren't so new.

Before we get into all that, I want to ask you how did you get into economic history? How did you get into this topic of the Great Depression in the first place?

Glock: Well, I, of course, [had] long-time interest in it, even in undergrad when I was a history major. When I went back to grad school in the wake of the 2008 financial crisis, again, to get a Ph.D. in history, I knew I wanted to study financial crises and, of course, the Great Depression was paramount there. It helped that when I was going to grad school in Rutgers that I was right next to the economics department there, which has a quite fantastic financial history section. I think some of whom you've had on the show: Hugh Rockoff and Michael Bordo and Eugene White, who was my advisor during my time there.

So, I got a really great background in financial and monetary history, and that certainly informed my dissertation and some of the work that emerged out of it, including this paper.

Beckworth: Wow, those are some great scholars. I need to get Eugene White on the show. He's definitely a great banking scholar too.

Glock: Yeah, he knows backwards and forwards.

Beckworth: He does. He does. Fantastic. Okay, well, let's talk about the Great Depression as a way to get into your paper. Just for our listeners who don't know, who may have forgotten, remind us about the Great Depression. What are the stylized facts about it?

Glock: Yes, so one of the things I often used to discuss with my students is it's almost impossible to overemphasize the importance and impact of the Great Depression. Once you start thinking about it, the ramifications of it seem to kind of ripple outwards as far as the eye can see. From 1929 to about 1933, global industrial production dropped by a third seemingly with no supply-side cause as far as anyone could tell. No massive famines, no industrial disasters, just across the globe you saw a very sudden collapse in production GDP.

This was accompanied by a massive collapse in prices across most of the globe too, about a 33 percent decline in the price level. United States was the worst hit of all, even though it was by far the richest and most industrialized country. Its industrial production dropped by over around 45 percent in this period before recovering very quickly in the U.S. and elsewhere, as we'll discuss later when the United States and other countries got off the gold standard leading to very sudden spikes in aggregate demand and sudden increases in gross domestic production.

That sort of global economic collapse, the level of the collapse, the amount of the collapse across many different countries was unprecedented and has never happened before or since. At the same time, the political ramifications, as many people pointed out, are perhaps even more important. The most significant of which is the rise of the Nazis in Germany, which can be pretty confidentially laid at the feet of the Great Depression, which therefore, of course, caused World War II, the rise of Communism in Eastern Europe, basically, any sort of disaster you can think of in the last half of the 20th Century.

Understanding why this collapse happened has been essential to both macroeconomics, political historians, almost anyone who studies the 20th century, and people are still continuing to wrestle with it. If we don't understand this, we're not going to understand a lot about why some of the great disasters of the 20th century took place. As Ben Bernanke said, it is sort of the Holy Grail of macroeconomics too and with good reason. 

Beckworth: Yes. There's some other, what I would call, stylized facts I just wanted to highlight that you touched on, and that is how long did it last? It lasted roughly a decade. Is that correct?

Glock: Well, yes. If you look at the actual collapse in, say, the United States in gross domestic product, that basically lasted from '29 till '33.

Beckworth: Okay.

Glock: But we had unemployment rates that were continuing in the double digits, 15, 16 percent, up until around 1940, 1941. Even, you would think 10 years after the start of the Great Depression, a double-digit unemployment rate higher than even the worse of what we suffered during the recent Great Recession, seems like a continuing recession in many cases.

So, the length of the Great Depression and the slowness of the recovery over the long-term was a big part of what made it so disastrous. Then other countries had different levels of recovery at different times. As I said before, the U.S. did happen to be both the largest total collapse and the slowest to recover, so we suffered the brunt of it.

Beckworth: Yeah, there was this huge gap in the U.S. economic production, well below where we should be, for almost a decade. You mentioned this first contraction, which is, I think, is often called the Great Contraction, '29 to '33 the economy literally gets smaller and smaller.

There's another second contraction in '36, '37.

Glock: Basically, from late '37 to early '38, often called-

Beckworth: '38, okay.

Glock: ... called the Roosevelt Recession.

Beckworth: You got two outright contractions, very slow recovery, so there's still all this excess capacity, lots of unemployment for a whole decade. It's hugely consequential. There's also this story told of a real sharp recovery in 1933. Maybe we'll come back to that later after we talk about your paper, but a real sharp recovery in 1933 that's often tied to FDR going off gold.

Then, that's like a great recovery. It's kind of stalled. You don't see the real, true recovery, the standard story tells us at least, until World War II. I know there's a critique of that story as well, but the standard story is World War II is what finally got us free from that.

One of the other underlying stories is that the Federal Reserve really blew it. Milton Friedman really stressed this, and he kind of rewrote the story on how consequential money is with his famous history book of money throughout the U.S. history. One of the stories, I think, most people take for granted now is the Fed could have done more, but it didn't do more.

So, I wanted to segue into your paper, which I mentioned before is a great discussion of what the Fed was thinking during this period, and it really sheds some new light on their views on monetary policy. Before we get into it and what it means, and it's going to touch on long-term interest rates, maybe you can share what the Fed was thinking before then. What was the context leading up to this important issue, the Riefler-Keynes Doctrine? What's the stage being set before we get into the discussion of this doctrine?

Glock: Sure. Ever since basically Friedman and Schwartz's *A Monetary History of the United States* in 1962, there's been a broad consensus that the Federal Reserve was central in both causing and exacerbating the Great Depression. So, there's, of course, been a concomitant concern then what exactly was the Fed thinking? If the ramifications of the Great Depression are as severe as we pointed out they are, then this puts a lot of weight on trying to understand basically what 12 central bankers, the 12 central Federal Reserve Bank governors were thinking in this period from 1929 until 1933. Whatever they were thinking in some sense shaped the entire course of human history, and so we really need to understand what was going on in their heads.

Before Friedman and Schwartz came along, there wasn't much concern about this because most people thought the Federal Reserve had basically done everything it could do to prevent the Great Depression. People like John Maynard Keynes himself and some others said, "Look, the amount of base money in the United States increased during this period. Interest rates were very low." By that measure, we were in a liquidity trap. There was nothing much the Fed could do, and therefore, understanding what they were thinking wasn't important because the economy must have been collapsing for some other reason.

When Friedman and Schwartz showed that well, if you look at a broader definition of the money supply, M2 in their period, as they discussed it, then, clearly, the Fed was letting money supply collapse. We have to understand why they were doing that. According to Friedman and Schwartz, the main reason was a tubercle bacillus that crept into Benjamin Strong's lungs in the late 19 teens. Benjamin Strong being the governor of the New York Federal Reserve Bank and an active exponent of expansionary monetary policy.

Unfortunately, according to Friedman and Schwartz, after Benjamin Strong died, the Federal Reserve basically took a contractionary view of monetary policy. They looked too much at short-term interest rates, and they look and thought that they were being expansionary when, in fact, they were being very contractionary. On other hands, they thought that many people in the Federal Reserve actually wanted a contraction because that would supposedly liquidate some of the bad speculation out of the system. That was their sort of logic to what the Federal Reserve was thinking.

Beckworth: Judge, let me ask this question. Just to be clear, that was a reasonable take given what you hinted at earlier. There were 12 central banks effectively, 12 effectively independent, which is very different than today, right? Each regional bank could set monetary policy in its district, is that right?

Glock: That's correct. They were somewhat organized since 1923 under what later became known as the Federal Open Market Committee, but, basically, they had a fair amount of discretion in terms of the discount rates they set, how many securities they purchased. These decisions were often appealable to the Board of Governors in D.C., but, at that time, the Board of Governors was much less substantial and powerful than these 12 independent Federal Reserve Bank governors.

So, yes, these people were the real powers behind monetary policy in this period. When Friedman and Schwartz looked at, those were the people they looked at to see what their logic and thought processes were at the time.

Beckworth: Yeah, so when the most important regional bank president dies, it would seem, on the surface, at least consequential to what the Fed's going to be doing. Tell the rest of the story.

Glock: Okay, and so I guess I'll keep going on about some of the previous, yeah, the previous thoughts about what the Federal Reserve was thinking. The next major contribution to this history, and the one that kind of survives up to the present in which I'm discussing in my paper, is the Allan Meltzer and Karl Brunner argument, what they call the Riefler-Burgess Doctrine.

Now, to get into that, we need to confront two issues that were ... Our one main issue that was important in the Riefler-Burgess Doctrine and that is the Real Bills Doctrine. Should I go into that for a-

Beckworth: Yeah, tell our listeners what that is.

Glock: This idea often traced as going back to Adam Smith is that, basically, because a bank relies on short-term liabilities, its deposits, it should also rely on very short-term assets, often would describe commercial paper, usually 60 to 90-days due. Adam Smith had a famous sort of metaphor where he described a bank should be like a pond where a river is always flowing in, and a river is always flowing out of it to keep the level stable.

Many people took this view to say as long as a central bank was merely discounting short-term commercial paper, the 60, 90-day commercial paper, that meant it was only responding to "the real needs of trade," and that meant it wasn't being either expansionary or contractionary. Well, if people are offering you commercial paper, then you should accept it and discount it. If they're not, then you shouldn't worry about it.

On the other hand, this did leave an important variable unexplained, and that's the interest rate. Of course, it's a very different situation if a central bank is not being offered any paper to discount when it's offering a 15 percent discount rate versus when it's offering a one percent discount rate, basically, if it's charging more to loan its money or charging less to loan its money.

What Allan Meltzer and Karl Brunner brought to this was to say, "You look at the Federal Reserve in this period, they were obsessed with this Riefler-Burgess Doctrine." They said, Riefler-Burgess was said that they could measure the right level of interest rates by how much these banks were borrowing from the Federal Reserve and how much open market purchases the Federal Reserve was doing at the time. So, if banks weren't borrowing, they weren't borrowing too much, that meant interest rate was probably about right. If they weren't borrowing at all, that might mean it was too high or too low.

They could use open market purchases to affect the level of interest rates, the level of discounting, at the same time that they were using the discount window to also affect the amount of reserves in the system. Hopefully, that's not too complicated, but just for the sake of the program, important to remember that, at the time, the Federal Reserve had two important levers of monetary policy. One was the discounting window and the discount rate, and the other was either buying or selling government bonds, which would either put more or less money into the economy respectively.

The Riefler-Burgess Doctrine was about trying to get the right level of short-term interest rates and the right level of commercial bank borrowing from the Federal Reserve to make this Real Bills Doctrine effective.

Beckworth: Now, my understanding of the Real Bills Doctrine is that it was a terrible idea insofar as it made procyclical monetary policy. Is that a fair assessment?

Glock: Yeah, if no one's offering paper to the Federal Reserve, that could [mean] you're in a horrible recession and the interest rates are too high relative to an equilibrium rate. Therefore, the Real Bills Doctrine can exacerbate that problem.

Beckworth: Okay, so how does the Real Bills Doctrine tie into the idea that you develop in your paper, the Riefler-Keynes Doctrine?

Glock: Yes. Okay, this gets us to the innovations of, what I call, the Riefler-Keynes Doctrine, what some people at the time, actually, called the Riefler-Keynes Doctrine, which was, first of all, the first most important part was that short-term interest rates are a bad measure of the effectiveness of monetary policy. Now, not in the sense that some things we would think today such as, "Well, it's dependent on expectations of future inflation or deflation," but more so in the sense, because short-term interest rates don't have a significant impact on investment. That was the first important contribution of the Riefler-Keynes Doctrine.

People like Wesley Clair Mitchell, famous professor, Columbia teacher of Arthur Burns and who later taught Milton Friedman, said, "Look, when you look at most businesses and their balance sheet, an increase of one or two percent on short-term borrowing doesn't make a big difference. What does make a big difference is the borrowing on long-term interest rates, that an interest rate increase of one or two percent for an investment that would last for five to 10 years would make a very significant impact on the amount of borrowing, and therefore, make an impact on the amount of investment."

Therefore, since we could, as far as they could tell, this sort of long-term fixed investment tended to lead the business cycle, maybe these long-term interest rates were much more essential in terms of determining business cycle's up and downs than the previous Real Bills theorists had thought.

Beckworth: Okay, so the first key idea is what really matters is long-term interest rates for the economy. Short-term rates aren't as consequential.

Glock: Absolutely.

Beckworth: Now, the second key idea, walk us through that. I believe that is that the Fed could influence those long-term rates. Is that right?

Glock: That's correct. When people like Wesley Clair Mitchell mentioned that long-term rates were important to the business cycle, that didn't seem to offer much policy ideas for the Federal Reserve, for other central banks, because the Federal Reserve was set up, like most central banks, only to loan on short-term commercial paper. They were still, to an extent, influenced by this Real Bills Doctrine, that that's the job of a central bank to give liquidity and discounts to this short-term commercial paper.

Another theorist, Harold Moulton, at the time, later the head of the Brookings Institute, said, "Well, no there's this kind of national, unified money market," something we don't think of as that kind of surprising today, but any sort of lending on the short-term moves its way into the long-term investment market. He said, "Well, you can look at this by looking at the actual commercial banks and practices. The commercial banks just like the Federal Reserve itself. We're supposed to loan only on short-term commercial paper."

In fact, it was illegal for most of the commercial banks in the United States to do things like make mortgages or make very long-time investment loans. But he said, "In practice, these commercial banks renew these short-term loans over and over and over again, and so they function like long-time investment loans." Even if the Federal Reserve pumps excess money into the economy, just through the short-term market, this is going to migrate over into the long-term market, and that's going to affect these sort of long-term investments that Wesley Clair Mitchell talked about.

Here now, we have an opportunity for the Federal Reserve to start thinking about how its short-term interest rate policy can affect that long-term rate and therefore, the business cycle.

Beckworth: Was he thinking through a theory that's very similar to segmented markets we would say today, or is it similar to the Expectation Theory of long-term rates today? Any relation?

Glock: Well, so it wouldn't be till later that they would formulate something as clear as either a preferred habitat or, yeah, segmented markets, or Expectations Theory of the term structure of interest rates. At the same time, they were trying to think about how certain markets ... They would probably be closest to that segmented market idea, partially independent, but not totally. There was different sorts of demands for borrowing in different sorts of markets, but the sort of supply-side, the credit that went into it, could influence all the different interest rates, short to long-term.

Beckworth: Okay, so again, the first insight, or the first idea of this doctrine, is that long-term rates are more important for the economy than short-term rates in terms of monetary policy. Number two, the Fed, in theory, could influence those long-term rates, and a third key doctrine is that the Fed could make the debt more liquid, or what you call shiftable, the term they use shiftable. Explain that third point.

Glock: Yes. How we think of liquidity today is very distinct to how they used to think about liquidity around the time of the founding of the Federal Reserve, and that was a bill. Our debt is liquid if it comes due soon. If a bill comes due in 30 days or 90 days, that's a fairly liquid bill. A five-year bond or whatever else length of bond at that distance is not going to be very liquid. Today, we think of basically what began to be called in the 1920s the Shiftability Theory of Liquidity, which is, well, any debt or asset can be made potentially liquid if you can sell it to someone else, a stronger bank or another bank.

Some of the similar advocates, a lot of them coming out of what was called the Institutionalist School of Economic Thought said, "Well, we can set up commercial banks to make all of these assets shiftable," or as we would today call it just liquid. They don't have to rely just on short-term, liquid assets 60, 90-days due because if they're able to pawn off an asset to another bank, or ideally even to a central bank, every single asset on their balance sheet can be equally liquid. That's another way to get the interest rates on these long-term debts and assets down because the increased liquidity of that is going to make commercial banks more comfortable investing in them, and it's going to increase investment in these sorts of assets.

Both these measures opening up potentially the short-term discounting and amount of money going into the short-term market, and two, potentially more long-term changes through the ability of commercial banks to invest, or the ability even of the Federal Reserve to buy these sort of long-term assets can also push down the interest rate on the crucial long-term debts and assets.

Beckworth: Yeah, so the Riefler-Keynes Doctrine sounds a lot like some of the thinking today, right? Some of the thinking today is, and we saw this over the past decade, let's go out on the yield curve, let's buy up 10-year treasuries, let's try to lower the interest rate that's offered. It seems some of the same ideas we're talking about today were being discussed back then.

Glock: I think so, exactly. If you look at a lot of the language, and we'll get into this of both Federal Reserve researchers and officials at the time, it seems not too distanced from we what we think of as contemporary New Keynesian policy. It is really focused on the effect of interest rates, especially long-term interest rates on investment, fixed investment. A lot of what Ben Bernanke and Gertler and some others have said in the last 20, 30 years really emphasized this point, and this point was emphasized again in the 2008 crisis.

In this sense, I think you can find a lot more similarities between what the Federal Reserve and policymakers were thinking in 1929, and what they were also thinking in 2008.

Beckworth: Obviously, the circumstances drove it, right? They had a very sharp contraction then. We had a sharp contraction here. You get near the zero lower bound. Maybe that also motivates some of the thinking, "Let's go beyond just short-term interest rates," but it is still very stunning. Again, this is why this paper was so interesting to me, that I hadn't seen this discussion before. Again, just to stress the role of teaching the history of economic thought maybe more of us would know about this, but let's be clear, this doctrine, this Riefler-Keynes Doctrine, your article is really the first one to kind of pull it all together and to be published on this, right?

Glock: That's correct. The term Riefler-Keynes theory or Riefler-Keynes Doctrine I found at least in two different published sources in the 1930s, so this was a contemporary term unlike the Riefler-Burgess Doctrine, which Allan Meltzer admitted he kind of came up with as a combination of these previous ideas that he thought were related. People at the time were referring to both the Riefler and, as we'll get to in a second, John Maynard Keynes in the same breath and thinking that these two individuals and some of the other economists around them had similar ideas about what should be done to counteract a depression.

As I hope I show, these ideas were very prominent both in the Hoover and Roosevelt administrations and in the Federal Reserve itself.

Beckworth: Yeah, so now when professors teach history of economic thought, they can use your paper thanks to your hard work.

Glock: I hope so.

Beckworth: Again, this is just so striking how relevant this is to discussions today. Not only do we talk about large-scale asset purchases and QE of the past decade done by the Federal Reserve, Bank of England, the European Central Bank, Bank of Japan, but there's now talk about doing things such as yield curve control. Bank of Japan is doing that. They're trying to keep the 10-year treasury yield a certain value, but others have been talking about it.

This year, the Fed's having a review of its policies. One of the points that have come up is should the Fed think about yield-curve control. Then on top of this, I think makes this extra relevant, is the fact that long-term yields have been declining. They've been declining a lot, this kind of secular decline in 10-year treasuries, which are typically the benchmark interest rate all across the advanced economies. Germany's had close to zero, slightly negative. Switzerland's been very negative. U.S. is pretty low, around two percent.

I was just reading today, about some countries that now have 100-year bonds. Austria, Belgium, and Ireland have 100-year bonds. This is even more surprising. The University of California system has a 100-year bond out as well. What I think is going to happen, this is just my prediction here, if we continue to see this decline in long-term rates so that the 10-years get really low, I think we're going to start seeing governments issuing more long, long-term, 50-year bonds, 100-year bonds.

So the debates they had in the 1930s about adjusting long-term rates is going to be moving out on the yield curve possibly even farther. That's speculation, but I think this discussion's relevant because it could be possible.

Glock: Yeah, so we could go back to the 18th Century where the British government admitted its Consols, which were indefinite bonds.

Beckworth: There you go.

Glock: Until the end of time. Who knows?

Beckworth: Right. So, unless some kind of shock comes along that brings us out of this kind of secular stagnation trap, in my mind, it's not a far-fetched scenario where we do get the 10-year treasuries in the U.S. getting really, really low so the Treasury looks beyond that, or monetary policy looks beyond that.

But, let's go on with the development of this idea. You've mentioned some individuals already, but you also mentioned in your paper that in addition to these individuals who are involved in the policy world, John Maynard Keynes, he embraced this idea as well. Tell us about his participation in this debate.

Glock: Yeah, absolutely. If we look at John Maynard Keynes in the early 1920s, he sort of declared himself a dyed-in-the-wool quantity theorist which, like their later ancestors, basically looked at the quantity and supply of money, the demand and supply of money, to see the tightness and looseness of monetary policy. By the end of the 1920s, he became much more interested in the effects of interest rates, and especially of the effects of long-term interest rates.

Some of the previous researchers on Keynes, probably butchering the name, but I think it's Axel Leijonhufvud, said that, "Listen when Keynes talks about interest rates in most of his 1930s work, he's talking about long-term interest rates." This is often missed in the discussions of IS-LM curves or the interpretation of Keynes. Keynes in the *Treatise on Money* and some of his other work said very clearly, the real impact of monetary policy is through investment and long-term fixed investment, and particularly the impact of long-term interest rates on fixed investment.

If you look at the *Treatise of Money Two* in 1930, he said he quoted pages and pages of Winfield Rifler's work so both the other half of the Riefler-Keynes Doctrine and the other half of Riefler-Burgess Doctrine, to say that, "Look, here's evidence that this Winfield Riefler, then working at the Federal Reserve at the time, compiled that showed there's this very close movement between short-term and long-term rates, that short-term rates are going to affect long-term rates."

There's also evidence, going back to some of the other theorists I mentioned, that these long-term rates are the real determinant of the business cycle. So, he says already in the early 1930s, "If we want to get out of this slump, the real thing we can do is try to lower these short-term rates to hopefully have an effect on these long-term rates. That's what's going to move us out of the already burgeoning depression right now."

Winfield Riefler was also saying the same things as he was working at the research division of the Fed to some of his bosses. So we can discuss some of the policymakers in the Fed that were abiding by these same ideas.

Beckworth: Yeah, before we jump into the Fed's adoption or embracing of this idea, a little bit more on Winfield Riefler. He has a book. I believe it was kind of key, a kind of a catalyst because you mentioned Keynes extensively cited Riefler's book. But the book's title was Money Rates and the Money Markets of the United States (1930). Was this book the big bombshell, or was it just building on the shoulders of the previous individuals you mentioned like Wesley Clair Mitchell?

Glock: Yeah. To an extent, it was the empirical bombshell. To a lot of people, it seemed to give the empirical evidence the previous theoretical work lacked. There was a chart in this book that I reproduced in my paper and that John Maynard Keynes also reproduced in his book ... I think one of the few charts he's ever reproduced from someone else's work, where Keynes was, of course, not a big fan of sharing praise when he could afford it ... that seemed to show just over the past 11 years before the book was published, that short-term and long-term rates moved in almost perfect synchronicity.

This seemed to show a lot of people these previous ideas that the institutionalist had talked about maybe had some truth to them, and also provided some pretty sharp evidence on terms of how these long-term rates affected total investment in the economy. So, this book provided the evidence people needed to say, "Wait, this is the best measures we have of how monetary policy is working in the real economy," and a lot of the evidence though he was taking from Federal Reserve research information, data tables, and so on that were being used at the Federal Reserve at the exact same time.

Beckworth: Yeah, I looked at that graph with some interest. This isn't particularly relevant to our discussion, but just it struck me, writing a book in 1930 where you have these detailed graphs, it must have been a real chore back then. They don't have Excel or any kind of word processor.

But any event, the book was important. It shaped a lot of thinking. It was a culmination of thought of these institutionalist economists you mentioned already. I would just also mention a few other names: Alvin Hansen, Allyn Young. Of course, Alvin Hansen's known for his secular stagnation views at this time as well, so it made a lot of sense that he would be on board with this.

This book, okay, it arrives in 1930. Tell us how its influence seeps into the Fed and what players at the Fed are important in promoting this understanding.

Glock: Yes, so if you look at the people at some of the top positions of the Fed, they seem to be full-throated supporters of the general Riefler-Keynes Doctrine ideas, that long-term interest rates are the most important, that short-term rates effects long rates, and that you can try to increase the shiftability of long-term assets. One of the other most important [people who] believes this is Randolph Burgess, the other half of this opposed Riefler-Burgess Doctrine, who was writing articles in 1930 and 1931 about [why] credit's important primarily through its effect on the availability of long-term money and the effect of interest rates in the security market and mortgage market.

Most importantly, probably the greatest believer in it was George Harrison, who was the president after Benjamin Strong at the Federal Reserve Bank of New York, and would be for the next four or five years, would say pretty consistently in Federal Open Market Committee meetings, internal memorandum, and elsewhere that the main effect of monetary policy is by of reducing long-term interest rates and spurring fixed investment.

You see these concerns come out even in memos in late 1928 and 1929. They showed a lot of they have charts that go into the Federal Open Market Committee meetings that show pretty clearly when long-term interest rates go up, a particular fixed investment, most especially building, tended to go down. Even when they were raising interest rates in 1929 to squelch the supposed stock market boom, George Harrison, Randolph Burgess, Winfield Riefler and others were saying we're already concerned of the effect of these high, long-term interest rates on the construction industry and fixed investment.

After the collapse, when they start loosening monetary policy and lowering interest rates, they say time and again, "What we need to do is lower interest rates to spur construction, increase fixed investment, and lower long-term interest rates."

Beckworth: Yeah, it's interesting, in the article, you outline how George Harrison, which, as you said, was the president of the New York Fed, wrote a memo, I believe, in 1930, that he sent out to all the other presidents. He really needed to convince them to the understanding of this doctrine and why it was important to lower long-term yields, which again, this speaks to this challenge where you got 12 regional banks. They're effectively, at this time, setting monetary policy, and there's some effort to coordinate.

I just wonder, we're going to speculate here, but if Benjamin Strong had been alive at this time, number one, would he have bought into this doctrine, and number two, could he have convinced all the other 11 banks to join in in pushing down long-term yields?

Glock: It's hard to know, of course, and on one level, a lot of previous researchers have just kind of divided the Reserve Bank presidents or governors of the time into expansionary and contractionary camps and left it at that. But I think it is important to see why these governors thought certain policies were expansionary or contractionary and when they thought they were expansionary or contractionary.

This gets, perhaps, even to the potential problems with the Riefler-Keynes Doctrine at the time. Someone like Harrison, most of the time, was much more a believer in what we think of as expansionary monetary policy than others. The quote you mentioned he sent around as sort of round-robin letter to all the Reserve Bank presidents, and I'll read it, just at least a short passage of it.

Beckworth: Yeah, do that.

Glock: It says, "In previous business depressions, recovery has never taken place until there's been a strong bond market through which new enterprise requiring long-time capital, maybe finance. As indicated in the attached chart likely done by Winfield Riefler, whenever the Federal Reserve System embark upon a program of purchasing government securities in the short-term, the bond market has become much more active and stronger, since short-time money becomes less profitable in comparison with long-time money and this money shifts to the later market, including some […] close at the end.

This sent this around, and some people in the Federal Reserve Open Market Committee basically said this. Eugene Black later became the governor of the Federal Reserve Board said, "Believe the Federal Reserve System has a responsibility toward the bond market, towards financing new enterprise and furnishing longtime capital." In other places, like Charles Hamlin said, "Low rates for short-term borrowing will eventually help long-term borrowing," but this wasn't universal.

So, I have other quotes from George Norris of the Philadelphia Reserve Bank who says, "This is counter to everything we were taught to believe." He says, "If I understand the reasoning correctly, the policy of buying government securities is justified by some arguments such as this: we're in a period of depression characterized by falling commodity prices. This condition cannot be corrected without an increase of building activity, building activity we brought about by low rates for long-time loans. Low rates for long-time loans will only come with a strong and active bond market. Therefore, we should bring about this condition in the bond market by making short-time credit so cheap that banks' investors will be driven to the bond market to utilize their funds."

He was against it. He said, "Numerous leaps of logic in there don't make sense to me and my understanding of that," but that's one of the best descriptions we have of what he was countering to see it even then as the main impetus of thought at the Federal Reserve at the time. On the whole, I think we can say that as Allan Meltzer and others have pointed out, people like George Harrison and Winfield Riefler got their way at the Federal Reserve Open Market Committee meetings. Even though there was these divisions, they, in large part, directed the open market policies and interest rates for the next three or four years, which obviously was not quite enough to alleviate or prevent the Depression.

Beckworth: I think you can make an even stronger case, Judge, and you do this in your paper by bringing in discussion of President Hoover during this time. President Hoover and Harrison of the New York Fed were close friends, and apparently, Harrison convinced Hoover of the Riefler-Keynes Doctrine. Is that right?

Glock: That's right. If you look, Hoover, of course, is famous for some misstatements about the Great Depression. A few, I believe, even weeks after the stock market crash he famously said, "The fundamental business of America is strong and secure." Everyone quotes this as an obviously, in hindsight, ridiculous statement, but they all forget in the same speech he noted one thing that he thought was potentially destructive and that they had to worry about, and he said, "The high, long-term interest rates have inhibited construction and building activity, and these need to be corrected if we're going to begin on an upswing again."

So, George Harrison, who some people said was "the top man" in the Hoover administration, at least for a period, certainly got Hoover to believe in this theory. He gave numerous speeches over the next year and a half about the real goal was to get short-term money to move into the long-term market and eventually help construction fixed investment. He eventually too helped change the Federal Reserve Board in Washington D.C. because of this. He basically put Eugene Meyer, who is a believer in the Riefler-Keynes doctrine, and said in numerous fashions before and afterwards that these ideas were sound, to replace Roy Young and one other Federal Reserve Board governor, kind of a coup at the board that's a-

Beckworth: Yeah, I thought of Donald Trump when I was reading this. It was like, "Wow, President Hoover kind of paved the way for President Trump in terms of replacing Fed chairs, and, of course, back then, I guess the Board of Governors wasn't as powerful or as consequential at that time, right?

Glock: Exactly. It wasn't as consequential as the Reserve Bank governors, but there's been speculation ever since September 1930 that Hoover might have had something to do with this. I found some, some letters in the Hoover Library and the Charles Hamlin diaries that this was probably so … that Hoover probably engineered the then-current head of the Federal Reserve Board to leave and move into the Federal Reserve Bank of Boston and kicked out one other board member in order so he can place his own members on the board. Later on, people like Charles Hamlin complained about what he called the board's “Hooverizing.”

Beckworth: “Hooverizing,” nice.

Glock: Yeah, the increasing obsequiousness, with which the board treated Hoover's request. In that sense, Eugene Myers, the new head of the board, tried to be as operationally involved as possible. He attended the Federal Open Market Committee meetings, said very clearly ... One quote I had in the paper is that he told the committees, "The whole history of investment showed that money would go from the short-term into long-term channels," and said this was one of his main focus.

In these senses, Hoover too was trying to push the Riefler-Keynes Doctrine, and this was his, you can even argue, his main focus in the first two years of the Depression in terms of how he thought it was going to reverse it.

Beckworth: Yeah, since the Board of Governors didn't have a lot of teeth, not really powerful, all they could really do is cheerlead. He was the big cheerleader for the Riefler-Keynes Doctrine. The point I think you're making here, you're painting a picture that this doctrine was very well understood. It was cited. It was promoted by many people within the Fed. So, the question is, well, did it matter?

There are two ways it can matter. One, did they take steps to influence long-term rates, and then two, how did it affect monetary policy in the Great Depression in terms of its response to the Great Depression? Let's tackle the first one first, the first point. You do give evidence that they actually did take concrete steps to influence long-term rates, and one of the most surprising points you make on this is that the QE program they had in 1932, or it was sort of a QE program, I guess, a large-scale, asset purchase program, afterwards they went back, and they extended the average maturity of their holdings from this purchase.

Glock: Yes, absolutely. A lot of people have written about in early 1932, the Federal Reserve Board and bank governors, after a change in the law that Hoover had pushed, began purchasing hundreds of millions of dollars of government securities in the open market with the hope of flooding the banks with excess reserves, and encouraging increased lending. At the same time, they were beginning to move into this shiftability aspect of the Riefler-Keynes Doctrine.

Beginning in the late 1930s, John Maynard Keynes, Riefler, and others noticed that the long-term interest rates didn't seem to be responding as much to the changes in short-term interest rates that they had previously. All this evidence they had of an interconnected monetary market and a close connection between the two rates, it seemed to disappear in the Great Depression itself. So, they were flooding all this short-term money into the market, but long-term rates had moved down very slowly.

John Maynard Keynes says this equilibrium between short and long-term rates, as far as he could tell, was the fundamental reason for the global slump. So, Keynes, Riefler, and others said, "Well, that means we have to act directly on long-term rates." That's not just doing something like QE, that's actually making direct investment in long-term assets, which was absolutely verboten in any central bank of the period, but began to be undertaken by the Fed.

I don't think anyone else has written about the change in the Fed's maturity structure in this period, but if you look ... Michael Bordo, I think, actually has done a little bit of this in the early 1932 period, but if you look at it, before early 1932, before about May in that year, the Federal Reserve had no government securities of greater than one year until maturity. By the end of 1932, it's over 25 percent of their assets are over one-year maturity, about seven or eight percent of those are over three years maturity, and by the 1935 period, the majority of Federal Reserve Bank assets are actually in government bonds of over one-year maturity.

In a sense, they're trying to do an early Operation Twist here. They're trying not just increase the total size of their balance sheet, but also shift to focus on these long-term assets. They also created, as I mentioned, a lot of other things of what we would think of as facilities of the Federal Reserve like what they were creating in 2008. Now, the Reconstruction Finance Corporation, when it was created in February 1932, around the same time as the first beginning of the QE program, was basically there as an adjunct to the Federal Reserve.

It was run by Eugene Meyer. Their offices were housed in the Federal Reserve buildings, and they were there explicitly to buy up assets that it was illegal for the Federal Reserve itself to buy up, which basically meant these long-term, private securities. The Reconstruction Finance Corporation would buy long-term bonds, even some equities occasionally, eventually would buy mortgages. At the same time, Hoover also set up the Federal Home Loan Banks, which had a similar sort of motivation. These Federal Home Loan Banks were a way to give liquidity, as he said, to small, independent mortgages, which in that point, didn't have any liquidity, basically were on the books of small local banks.

If you look at a lot of the features that both the Federal Reserve and the Hoover administration took in the last year of the Depression, they were almost entirely focused on this creating shiftability in long-term assets. They said the short-term market has basically run its course. We've tried everything we can, but if we increase shiftability and liquidity, give people confidence that the Federal Reserve or one of its new facilities will buy up these assets, then increasingly people will invest, and hopefully, that will create the sort of fixed investment we need.

This was with the wholehearted support of John Maynard Keynes and others. John Maynard Keynes, I quoted as saying too at one point that, "I would be okay with less short-term money and deposits available if you had more long-term assets on the Federal Reserve's balance sheet." He was a full-hearted advocate of this kind of Operation Twist idea even more so in a sense than the Federal Reserve. That was a significant motivator for most of their actions in that period.

Beckworth: Yeah, if you ask most people today when was the original Operation Twist, they would say, "Oh, 1961," because we had one in 2011. In fact, people at the Fed point back, "Let's see what happened in 1961," but this is striking because the original one was the early 30s. All these steps are just ... It's very interesting, amazing that they were taking these efforts to lower long-term interest rates.

You mentioned that they were limited, so they did the Refinance Corporation Home Lending Bank, but in 1935, they made some changes so they could explicitly themselves do more long-term investing. Let me switch gears now. They were taking concrete steps. They changed the law in 1935 or helped Congress move in that direction so they could take more explicit steps, but what role did that have, or how did that affect the recovery?

Because you also argue in the paper, that despite their efforts to influence long-term rates, it also contributed some kind of complacency, that they weren't paying as close attention to other indicators in the economy that were signaling things might be worse than they think they are.

Glock: Yeah, so I should be clear that in my paper, I don't try to take a firm stance on what was the correct way to view monetary policy at the time, or which was the best way to view it. I frankly don't have the econometric chops to do that as well as many other people could, but I do think there could be a misreading of this Riefler-Keynes Doctrine and to say that, "Well, look. If we look at what the Federal Reserve was doing at this time, they were very activist. They were acting in a way we think a lot of New Keynesian policymakers say they should act. They were focused on fixed investment, long-term rates, and so on."

Clearly, if we're just looking at the effects, they are disastrous. By any measure, Federal Reserve policy was clearly a failure in this period. In a sense, whatever the Riefler-Keynes Doctrine was saying they should do and whatever its actual impacts was, they probably weren't entirely positive. So on one level, I have a couple quotes from periods like September 1930. In January 1931, where some of the major Federal Reserve policymakers are saying, "Look, because the short-term rates aren't having a long-term effect, then we don't want to loosen monetary policy anymore."

Or, at the same time when they say, "Well, look. Long-term interest rates are already quite low, and, therefore, according to our doctrine, we don't have any need for increased lending." Now, many other researchers in the Federal Reserve say, "Well, that's probably because, in many sense, short-term and long-term interest rates aren't a great measure of the efficacy of monetary policy." Milton Friedman, of course, looked at something like M2. While we wouldn't look at that today, maybe some other sort of measure of how activist or contractionary monetary policy was such as a broad measure of money or nominal gross domestic product, which I know you're a fan of, it would probably be a better indicator of whether the Federal Reserve was being activist or not in this period.

I think, in many ways, this focus on even long-term interest rates was a distraction because they weren't seeing how the collapsing price level, the collapsing credit, amount of deposits in commercial banks, all of which they had available, if you look at their Open Market Committee meetings, and elsewhere, they had all of these charts exactly like we have today pretty much that showed all these collapsing indicators, but they ignored them because they were overwhelmingly focused on these long-term interest rates, which were providing bad signals about the stance of monetary policy and were telling them either that monetary policy was ineffective, or that insofar as it changed, the long-term rate wasn't having a real effect on investment.

When compared against what was actually happening, clearly, monetary policy could have been much more expansionary.

Beckworth: Okay, so let's go back to the Real Bills Doctrine, which Allan Meltzer and a lot of others have argued was the reason the Fed was timid in its response. How do you weight these two stories? Is there any truth to the Real Bills Doctrine, and if so, how important was that view in making the Fed timid versus the view you've outlined in your paper?

Glock: I think you could find a few true blue believers in the Real Bills Doctrine. I mentioned someone like George Norris in the Philadelphia bank, John Calkins, over here in my local San Francisco Reserve Bank, and McDougal over at Chicago, but the majority of the 12 Federal Open Market Committee seem to be much closer believers in the Eugene Meyer, George Harrison belief in pushing long-term rates. As Allan Meltzer, himself said, basically when George Harrison recommended a change, the rest of the banks were very likely to listen to him.

Both ideas certainly had an impact on the Fed at this period, and I wouldn't totally exclude one or the other, but if you look again, both at what the major policymakers were thinking and doing and at what the President Hoover administration was doing, they seem to be following closest to Riefler-Keynes ideas.

Beckworth: Well, you realize, Judge, your papers overthrowing a lot of literature here, right? Because a lot of literature points to Real Bills Doctrine being very important. I expect this paper to be widely cited.

Glock: Or maybe widely cited to argue with, but that's okay too.

Beckworth: As long as they spell your name right and cite you properly.

Glock: Yeah, that's it. I'm perfectly fine with that. Yeah, I don't want to dismiss this. As Allan Meltzer and Friedman and Schwartz themselves and others have pointed out, the Real Bills Doctrines were important at the time. They existed. People believed in them, but it's interesting. If you look even to Allan Meltzer or Friedman and Schwartz's quotes to them, they'll have a lot of quotes in their works about long-term interest rates and the attention that these policymakers paid to long-term interest rates, but they won't put those together into a coherent vision of that.

I think partially because this pre-history of the Great Depression thinking on monetary policy, institutionalist, was a little bit orthogonal to the main trend of monetary thought in the period. People like Wesley Clair Mitchell and Harold Moulton and Winfield Riefler people didn't really think as huge monetary theorists. At least in this area and a few other places like their influence on John Maynard Keynes, I think you can see that they were pretty crucial.

Beckworth: Your article really paints a picture that the Riefler-Keynes Doctrine was widely understood at the time. It was very influential at the Fed. President Hoover bought into it, and he did a Trump move on the Fed because he believes it. This view was an important view at the time, so my question is, how did we forget it? Why is it only 2019 that a researcher named Judge Glock went in and found, that has published a paper on it? That seems to me a glaring hole in the literature.

Glock: Well, I think partially because I think if I had to give a main reason, I think people did not look too seriously at the institutionalist economists that I cited originally. The institutionalist, for those of your listeners not familiar with it, they tended to be much more obsessed with the sort of societal and economic structures that affected the economy than other economists. They were somewhat outside the mainstream, Marshallian ideas about they were more focused on supply and demand curves about marginal changes.

So, a lot of people tended to think they didn't have a very coherent, clear idea about monetary policy, or if they did, it wasn't that important. Even though the term institutionalist economist can be fairly capacious, I think ... A few other people, look at Perry Mehrling, the most important of which. I think you can see that they, in a lot of different ways, they had impact on economists we do think that are much more important, John Maynard Keynes, of course, but also people like Lauchlin Currie who was a major believer in this doctrine and a major economists at the Federal Reserve during the early Roosevelt administration, and Marriner Eccles, a later Federal Reserve Board Chair who basically would repeat a lot of these ideas that George Harrison did in the early years of the Roosevelt administration as well.

I think this previous background of monetary thought wasn't appreciated or was seen as sort of assumed, just like a lot of these ideas seem commonsensical to us today. They don't seem so radical as they were viewed at the period, but they clearly had an important impact, and I hope, in a sense, I can only mention a few of the quotes here, but I hope that the bulk of them and the paper shows exactly how often and clearly people were promulgating these views.

Beckworth: We will provide a link to the paper so listeners can read the paper for themselves. They can see the footnotes and explore this issue themselves.

We only have a few minutes left, Judge, and I want to ask another question to wrap this all up. We mentioned earlier that there were really two stories told for the Great Depression. One is the timid response to the Federal Reserve in the U.S. The other is the global story, which is the mechanism was the integral gold center that transmitted and made this a global phenomenon. In your view, what was more important for the U.S.? Was it the global Great Depression, or was it this adherence to the Riefler-Keynes Doctrine and the Federal Reserve's timidity that was important in creating the Great Depression?

Glock: Well, I guess I think that they're very closely related.

Beckworth: Okay.

Glock: The Federal Reserve in the United States had basically around 35 percent of the world's global gold stock at the beginning of the Great Depression, and their amount of gold actually increased over the next two years basically till the dollar came under attack after England left the gold standard and some thought the United States would be the next to fall. In a sense, not only did the U.S. have a massively disproportionate amount of gold in this period, they continued to increase it during the majority of the Great Depression.

Insofar as the Federal Reserve was being excessively tight, again, depending on how we measure or describe that tightness or we think about that tightness, and the Riefler-Keynes Doctrine contributed to that, then that was certainly contributing to the global depression. At the same time, I think there's a lot to be said for the work of Eichengreen and Scott Sumner and others who showed that places are ... Doug Irwin as well. Places like France, which was accumulating vastly more gold reserve in this period than even the United States, they went from about 70 percent to about 27 percent of the global gold reserves during this period. They must have had a major contribution to the world economic collapse.

As we mentioned before, that an important power of the Great Depression's story is that it was global. It affected countries all across the world. Insofar as the U.S. had a massive amount of the world's gold, they were going to be in a sense an important conductor of what was happening everywhere. The Riefler-Keynes Doctrine might have contributed to them being excessively tight in this period.

Beckworth: Okay, so they are complementary stories, and they-

Glock: I hope.

Beckworth: Yeah, I think so. They help us understand what's going on here domestically with broad implications globally.

Well, our time is up. Our guest today has been Judge Glock, Judge, thank you for coming on the show.

Glock: Thank you so much, David. Real pleasure.

Beckworth: Macro Musings is produced by the Mercatus Center at George Mason University. If you haven't already, please subscribe via iTunes or your favorite podcast app. While you're there, please consider rating us and leaving a review. This helps other thoughtful people like you find the podcast. Thanks for listening.

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David Beckworth
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Sep 2, 2019
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